Fitch Ratings has upgraded the UK government’s credit rating to stable from negative, citing easing economic policy risks, while reaffirming the country’s rating at ‘AA-‘.
The decision is likely to be welcomed by British Prime Minister Rishi Sunak, whose Conservative Party is trailing Labour in opinion polls ahead of local elections in May.
Fitch said in a statement that economic policy risks have declined in the UK since it issued its negative outlook in October 2022, during the short-lived tenure of former Conservative Prime Minister Liz Truss.
The Truss government’s disastrous tax-cutting mini-budget has caused economic and political turmoil and led to her leaving the top job in British politics after just 49 days in office.
“We expect general government debt to be broadly stable from end-2025,” Fitch said, while expecting the UK’s public deficit to fall from 5.8% of GDP last year to 3.7% in 2025.
Fitch also welcomed the recent decline in annual inflation in the UK, which fell from a peak of 11.2% in October 2022 to 3.4% in February this year.
While this represents significant progress, inflation is still above the Bank of England’s 2% target.
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